The relatively inexpensive homes are designed to give thousands of Gulf Coast families still living in government-issued trailers in Mississippi and Louisiana a more homelike atmosphere.

Later Thursday, Bush was to visit an elementary school in D'Iberville in neighboring Harrison County.

"I have tremendous respect for Mrs. Bush, her dedication to education and reading," said Ocean Springs Mayor Connie Moran, who toured the demonstration cottages with Bush and architect Bruce Tolar. "I'll make her a Katrina cottage advocate."

Three cottages are located at "Cottage Village," an open area down a dirt road in downtown Ocean Springs.

Bush spent about 30 minutes touring two completed units, one 300 square feet and the other 500 square feet. A larger cottage — 1,300 square feet and two stories — was under construction nearby and many more are planned.

Bush said little during the tour, most of the time listening to Tolar's comments about the project.

Mississippi and Louisiana were among the Gulf Coast states that competed for federal dollars to test and build alternative housing that FEMA hopes can become a model for how to provide housing when the country suffers other disasters. Mississippi is receiving $281 million of the $400 million earmarked by Congress for the "Katrina Cottage" program, while Louisiana is getting $75 million.

Mike LeBetard of Biloxi, a partner with Tolar, said a major problem faced by coast families wanting a cottage is obtaining affordable insurance.

"We can build affordable housing, but we can't get them in it because of insurance," he said.

State Farm Insurance Cos. recently said it was suspending the writing of homeowners and commercial policies in Mississippi.

Bush spent about an hour at a restaurant on Ocean Spring's back bay. A number of people joined the first lady in the dining area, including U.S. Rep. Gene Taylor, D-Miss., and owner John McElroy and his family.

McElroy said the secret service had contacted him earlier in the week and asked if Laura Bush could stop at the restaurant. Asked if he thought about declining, McElroy responded, "Absolutely not."

A regular customer arrived at McElroy's and questioned a hostess about all the activity. She replied, "We have a dignitary in the house, I'll put it that way."